Texas School Finance Case Sent Back to Trial Court

On May 29, 2003, the Texas Supreme Court voted 8-1 to reverse the dismissal of an anti-Robin-Hood lawsuit by sending it back to the trial court for further consideration. Four districts filed West Orange-Cove Consolidated ISD v. Nelson in April 2001, alleging that the provision in Texas's 1993 school finance law that allows for recapture of money from property-wealthy districts to be disbursed to property-poor districts has become unconstitutional. On June 11, 2001, the District Court of Travis County dismissed the case, and the Texas Court of Appeals affirmed the dismissal on April 11, 2002.

Plaintiffs claim that the "Robin Hood" provision effectively forces property-wealthy districts to tax at the state maximum of $1.50 per $100 of assessed property value because it offers the option of local levies, which districts voters will approve to make up for the money that has to be remitted to the state for other districts. A statewide property tax is prohibited in the Texas constitution. The state countered that the districts were not spending at or near the limit in order to provide a basic education, and if a locality wanted to tax itself to get extras, the state was not responsible. In oral arguments before the Supreme Court in March, the state argued that the property tax cannot be considered "statewide" because not enough districts are spending at the $1.50 ceiling--"property-wealthy districts" for the purpose of Robin Hood comprise 84 of 1,000 districts statewide. The Supreme Court ruled that the Legislature "may actually have increased the pressure on school districts to tax at maximum" rates, and that plaintiffs should be allowed to go to trial and argue that their rates were intended either so that schools can meet state accreditation standards or so that they can provide a "general diffusion of knowledge," two ways of defining a basic education.

As reported in the Houston Chronicle, the Supreme Court finding creates some additional pressure for the Legislature to overhaul the Texas school-finance system, which it has been trying to do anyway. Governor Rick Perry and many legislators promised to repeal "Robin Hood" if they were elected, but the Senate and House were unable to agree on a new funding plan. On May 6, 2003, four weeks before the scheduled end to the session, the Senate's 31 members unanimously approved a plan that would raise the state sales tax from 6.25 percent to 7.25 percent, expand the sales tax to include services such as auto repair and advertising, increase the motor-vehicle sales tax from 6.25 percent to 8.75 cent, and exempt the poorest Texans from some of the sales tax. The bill would also lower the property-tax ceiling to 75 cents per $100. Accompanying the bill was a constitutional amendment creating a state property tax for schools which, if passed, would make the lawsuit moot.

The House, led by Speaker Tom Craddick, rejected the plan, claiming that it had insufficient time to consider it. Craddick offered to send the bill to the House committee he has appointed to study school finance. The goal is for the committee to have recommendations for the Legislature either before they meet next spring or, at the soonest, in the fall, if Governor Perry decides to call a special session.

Prepared May 30, 2003